The Distributed Ledger 100: The State of Blockchain Technology Today

TheDistributed
Ledger newsletter is almost two years old and this edition marks issue
number 100.

In issue one, published on November 20, 2015, I offered simple,
high-level, introductory answers to the question “What is
the blockchain?” Nearly two years later, I’ll highlight some recent news that
show just how far distributed ledger technology has come as it is increasingly
adopted by high-profile actors in business, technology and government.

The First
Blockchain

It makes sense to start this retrospective with cryptocurrencies,
the first application of modern blockchain technology to emerge. The “bad news”
that in the past used to wreak havoc in cryptocurrency markets doesn’t seem to
do the same now. For example, the recent government clampdown on Chinese
Bitcoin exchanges only caused a temporary dip in bitcoin’s price, which quickly
recovered.

Only a few weeks after JPMorgan Chase CEO Jamie Dimon dismissed
Bitcoin as a fraud, credible reports revealed that
Goldman Sachs is considering a new trading operation dedicated to bitcoin and
other digital currencies. In view of Goldman Sachs’s prestige, this move could
boost bitcoin’s standing among investors, and Goldman would be well positioned
to capitalize on further developments in the cryptocurrency sector.

Meanwhile,
Quorum, developed
by J.P. Morgan, is described as an enterprise-focused version of Ethereum,
especially suitable for applications requiring the high-speed and high-throughput
processing of private transactions within a permissioned group of known
participants. In October, Zcash announced the
integration of its “zero knowledge” technology on Quorum, which is likely to
increase the appeal of J.P. Morgan’s permissioned business blockchain to
security-conscious enterprises.

Growth in
Enterprise

The previous
issue of The Distributed Ledger addresses Oracle’s journey to become
the latest top-level corporate entrant in enterprise blockchains, and argues
that Oracle’s embrace of distributed ledger technology could be even more
significant than IBM’s and Microsoft’s. The company recently joined
Hyperledger, an open-source collaborative effort managed by the Linux
Foundation, to advance cross-industry blockchain technologies and introduced the Oracle
Blockchain Cloud Service.

“We’re introducing blockchain, both as a platform-as-a-service and
as a way to do secure transactions: intercompany accounting transactions,
procurement transactions and loyalty programs that span multiple providers in a
loyalty network, using blockchain to handle the secure hyperledger,” said
Thomas Kurian, president of product development at Oracle, at the OracleOpenWorld conference this month.

These examples show that distributed ledger technology is making
steady progress not only in its original application area of cryptocurrency,
but also in the enterprise world, with adoption by large companies and through mission-critical applications to enterprise needs such as accounting and supply
chain management.

The State
of Blockchain Technology

Distributed ledger technology is also advancing in the government
sector. According to an IBM
survey, 9 out of 10 governmental organizations plan to invest in
blockchains for use in financial transaction management, asset management,
contract management and regulatory compliance by 2018.

The United Arab Emirates (UAE), and particularly Dubai, remain at
the forefront of blockchain adoption for government services. Dubai wants to go
completely
paperless by 2020 and plans to do so by leveraging distributed ledgers. As
one of many first steps, the Dubai Land Department is
developing a system that will record all local real estate contracts on a
blockchain.

In Dubai, financial operators and blockchain startups are also planning to develop
and implement “emCash,” an encrypted digital currency that people can use to
pay for various government and non-government services.

Estonia, considered a leader in e-government powered by advanced
information technology, is running a very successful e-residency program, introduced
in 2014. The program manager, who is persuaded that in the long term
“governments may have no option but to (literally) accept cryptocurrencies,”
believes that Estonia
should start issuing crypto tokens to e-residents, which could
lead to a government-backed cryptocurrency dubbed “Estcoin.”

Sweden’s central bank, the Riksbank, is
considering whether the country should introduce a purely digital form of
government-backed money, perhaps using distributed ledgers. The central banks
of Singapore, Papua New
Guinea, Canada and others
are considering similar moves. A recent research
paper issued by the Bank of Canada, which considers a possible Bitcoin
standard similar to the gold standard, is especially interesting. Even China’s
central bank is cautiously
testing a digital currency.

The United Nations (UN) wants to develop scalable identity systems
by 2020. The UN’s 2017 ID2020
Summit, entitled “Platform for Change,” launched the ID2020 Alliance, a
consortium of public and private organizations that want to develop globally recognized
digital identity systems, not only for the online world but also for the “real”
world, with a $1 million initial investment from Accenture. At the 2017 Summit,
Accenture announced the
development of a prototype blockchain-based identity system, which runs on
Azure, Microsoft’s cloud computing system.

Smart contracts are bringing disruptive change not only to the
information technology sector but also to distributed hardware systems such as
the Internet of Things (IoT) — the upcoming network of billions of connected
devices (from self-driving cars to household appliances), wearable medical
devices, environmental and medical sensors, industrial robots and other smart
devices. It’s worth noting that, in one of the first conceptual outlines of
smart contracts, cryptographer Nick Szabo used an
IoT scenario: a car lock that operates only if the car has been paid for
according to the terms of a contract.

In September, the Trusted
IoT Alliance, which includes Bosch, BNY Mellon, Cisco and the Foxconn Group
among others, announced its plan
to develop a blockchain-enabled, trusted IoT and set the standard for an open-source
blockchain protocol to support IoT technology in major industries worldwide. In
China, Tencent established
a partnership with Intel to develop blockchain technology for IoT applications.

Based on these highlights, we can propose an answer to the
question in the title of this issue. The blockchain is a set of transformative
technologies, based on or inspired by Bitcoin’s first implementation of a decentralized,
cryptographically secured, trustless and tamper-proof distributed ledger, which
can be successfully applied to a wide, horizontal range of needs.